What is the legal development?

On 22 January 2016 The National Minimum Wage (Amendment) Regulations 2016 were passed and will come into effect on 1 April 2016.

They effectively create a new higher rate of national minimum wage for employees aged 25 years and over and introduce steeper penalties for non-compliance.

What does this mean in practice for employers?

In simple terms:  compliance with a higher rate of national minimum wage for those aged 25 and over – a ‘national living wage’. There may also be employee relations consequences for other employees currently earning more than their less qualified colleagues, as the pay gap may have reduced with the increase in the minimum wage rate.

But what does it mean for employers who aspire to be ‘living wage’ employers?

For many years the Living Wage Foundation has promoted payment of a ‘voluntary living wage’ (based on quite different calculations) at a higher hourly rate (currently £9.40 in London and £8.25 elsewhere in the UK).

So what will values driven organisations do? Will some employers latch on to the new ‘national living wage’ and promote this as an ethical badge (even though it is a statutory minimum requirement)? Or will they continue to pursue the ‘voluntary living wage’ with its different calculations and higher rate to demonstrate a willingness to pay a real living wage?  When you drill down, there are some distinct differences between the ‘national living wage’ and the ‘voluntary living wage’, apart from just the rates.

We have discussed this dilemma with a number of businesses. They have approached the issue from varying positions (with wide ranging commercial, ethical and values driven priorities) leading to some fascinating dilemmas.